France and Germany are leading the attack and want more control in tackling extreme speculation and to police the deficit spending of other member states.
The move by Europe’s two leading economies follows Greece’s outburst against naked CDS contracts, which it blames for for amplifying its bond market woes.
European Union finance ministers will discuss possible action in the CDS market on 16 March after Angela Merkel, German chancellor, and François Fillon, French prime minister, wrote to José Manuel Barroso, president of the European Commission, asking for an immediate investigation.
The Financial Services Authority has warned against rushing into emergency action.
Chairman, Adair Turner said: “We need to think about it ... clearly but ... it is not the key driver of what has gone on with perceptions of Greek risk. It would be wrong to rush into ... [taking] immediate action. We are trying to take that issue and think it through in a rounded fashion.”